RULES & REGULATIONS

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• The first 15 minutes of the exam session will be used to review the exam before commencing; a Q&A session is allowed during these 15 minutes. Students can ask their question and the professor’s response will be shared with the entire class. No disrupting the class after the first 15 minutes after the exam has been distributed.
• No student will be allowed in the exam session after 15 minutes.
• Students may only have a pen and calculator (if specified) on the desk. No extra paper, books, mobile phones, or electronic device is allowed. Any extra paper needed will be brought to you by the administration department upon request. All mobile phones should be switched off and students’ belongings on the floor at the front of the class; any person found with an unauthorized device, concealed or otherwise, will receive a zero on the exam.
• If a calculator has been authorized by the professor, then this must be a calculator. No cell phones, smart-phones or any electronic device of any sort will be permitted. In the case that a student has forgotten their calculator, they will be requested to do the calculations by hand or obtain one before the start time of the exam.
• Students may not leave the exam for any reason, should they insist of doing so they will not be allowed to return to the exam. Toilet issues should be addressed before the start of the exam; exams over 2 hours in duration, please leave your exam with the professor and ask to be escorted by an administration member to the bathroom.
• You may not leave the exam session during the last 15 minutes.
• Speaking is not allowed under any circumstances. Should a student be seen or heard communicating with another student, they will be disqualified for the session and awarded a zero for the exam.
• If a student is caught or suspected of cheating, he or she will be sent to the administration department immediately and a disciplinary file will be opened. Cheating of any kind will result in a 0 and no retake will be allowed.
• If formulas are allowed in the exam, only professors may give the necessary information to the student either by writing on the board or handing them directly to the students. Students may not use their own notes unless specified ahead of time.

By signing this document, I verify that I have read the above rules and am aware of the consequences of not abiding by them. My exam will only be valid when signed.

 

Start here:
Summary Table
Problem Brief Solution Weight
1

 

 

10%
2 a PeterCo Bonds % YTM, maturity=10Years S&P Rating Order from most secure (1) to least (5) Mark with “x” the Junk Bonds
A 3,1 BBB
B 2,3 A
C 4,6 BB
D 17.9 CC
E 12,3 CCC
10
b

 

10
20%
3
a)
10
b)
10
20%
4 Better Portfolio Why? Justify using financial arguments and formulas
a-Based on Return

5
b-Based on Risk

5
Based on Risk and Return

10
20%
5
a)
10
b)
5
15%
6

 

15%

Problem 1: (Excel is not required)

Explain the different between Expected Rate of Return and free risk rate (10 points)

 

 

 

 

 

 

 

 

Problem 2: (Excel is not required)
PeterCo has the following Government Bonds:

a-Complete the following table (Excel is not required, 10 points)

PeterCo Bonds % YTM, maturity=10Years S&P Rating Order from most secure (1) to least (5) Mark with “x” the Junk Bonds
A 3,1 BBB
B 2,3 A
C 4,6 BB
D 17.9 CC
E 12,3 CCC

b) Explain this: “As interest rates increase (decrease), the value of the bond decreases (increases)”, using Financials arguments and represent this relationship graphically (10 points):

 

 

 

 

 

 

Problem 3: (Excel is not required)
Bimbo Inc preferred stock is selling for 12 € in the market and pays a 5.60 € annual dividend. If the market or promised yield is 10%
a-what is the value of the stock for that investor? (10 points)

 

 

 

b-Should the investor acquire the stock? Why? (10 points)

 

Problem 4: (Excel is not required)
Turbo Inc is considering an investment in one of two portfolios.

Portfolio 1 Portfolio 2
E(r) 7,4% E(r) 16,2%
Standard Deviation 8,26% Standard
Deviation 2,26%

Given the information that follows, complete the table below using financial arguments and formulas:
a) which investment is better based on return and why?
b) which investment is better based on risk and why?
c) which investment is better based on section a and b and why?

Better Portfolio Why? Justify using financial arguments and formulas
a-Based on Return

5
b-Based on Risk

5
c-Based on Risk and Return

10

 

Problem 5: (Excel is optional)
CoKi-Cola outstanding common stock is currently selling in the market for 13 $. Dividends of 2,3 $ per share were paid last year, return on equity is 20% and its retention rate is 25 %. Picture the problem, decide on a solution strategy, solve and analyze
a) What is the value of the stock to you given a required rated of return of 16%? (10 points)

 

 

 

 

b) Should you purchase this stock? (5 points)

 

Problem 6: (Excel is optional)

What is the yield to maturity of a corporate bond with 20 years to maturity, a coupon rate of 5 % per year, a $1,000 par value, and a current market price of $1,250? Assume semiannual coupon payments. Picture the problem, decide on a solution strategy, solve and analyze. (15 points)

 

Sample Solution

up with a hypothesis, alongside pioneers today including Frowe (2011). Their hypothesis is formulated as an aide, regardless of whether we ought to do battle alongside conditions which should be thought of, how would it be a good idea for us we respond and not do during a conflict in the event that it is unavoidable, lastly what further move ought to be made later. To assess this hypothesis, one should take a gander at the suspicions made towards it, for instance, entertainers which scholars forget about and the delay between conventional scholars and innovators. In particular, there can be no conclusive hypothesis of the simply war, in light of the fact that everyone has an alternate understanding of this hypothesis, given its normativity. In any case, the hypothesis gives a harsh presentation of how we ought to continue in the midst of pressure and struggle, essentially the point of a simply war: ‘harmony and security of the district’ (Begby et al, 2006b, Page 310). Generally, this hypothesis is reasonable to utilize yet can’t at any point be viewed as a characteristic aide since it’s normatively conjectured. To respond to the inquiry, the exposition is involved 3 segments.

Jus promotion bellum
The beginning segment covers jus promotion bellum, the circumstances discussing whether an activity is legitimately OK to cause a conflict (Frowe (2011), Page 50). Vittola, first and foremost, examines one of the worthwhile motivations of war, in particular, is when damage is caused however he causes notice the damage doesn’t prompt conflict, it relies upon the degree or proportionality, one more condition to jus promotion bellum (Begby et al (2006b), Page 314). Frowe, nonetheless, contends the possibility of “worthy motivation” in light of “Power” which alludes to the security of political and regional privileges, alongside common freedoms. In contemporary view, this view is more convoluted to reply, given the ascent of globalization. Essentially, it is hard to gauge proportionality, especially in war, in light of the fact that not just that there is an epistemic issue in working out, yet again the present world has created (Frowe (2011), Page 54-6). Besides, Vittola contends war is fundamental, not just for protective purposes, ‘since it is legal to oppose force with force,’ yet in addition to battle against the treacherous, a hostile conflict, countries which are not rebuffed for acting unreasonably towards its own kin or have shamefully taken land from the home country (Begby et al (2006b), Page 310&313); to “show its foes a thing or two,” yet principally to accomplish the point of war. This approves Aristotle’s contention: ‘there should be battle for harmony (Aristotle (1996), Page 187). Nonetheless, Frowe contends “self-preservation” has a majority of portrayals, found in Part 1, demonstrating the way that self-protection can’t necessarily legitimize one’s activities. Much more risky, is the situation of self-protection in war, where two clashing perspectives are laid out: The Collectivists, a totally different hypothesis and the Individualists, the continuation of the homegrown hypothesis of self-preservation (Frowe (2011), Page 9& 29-34). All the more critically, Frowe discredits Vittola’s view on retribution in light of the fact that right off the bat it enables the punisher’s power, yet additionally the present world forestalls this activity between nations through lawful bodies like the UN, since we have modernized into a generally tranquil society (Frowe (2011), Page 80-1). Above all, Frowe further disproves Vittola through his case that ‘right goal can’t be blamed so as to take up arms in light of expected wrong,’ recommending we can’t simply hurt another in light of the fact that they have accomplished something unfair. Different elements should be thought of, for instance, Proportionality. Thirdly, Vittola contends that war ought to be stayed away from (Begby et al (2006b), Page 332) and that we ought to continue conditions carefully. This is upheld by the “final retreat” position in Frowe, where war ought not be allowed except if all actions to look for strategy falls flat (Frowe (2011), Page 62). This implies war ought not be pronounced until one party must choose the option to proclaim battle, to safeguard

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